New Options for Investing in Renewable Energy and Clean Infrastructure

Note: Although this entry discusses emerging investment opportunities, it is not intended as and should not be misunderstood as investment advice or a recommendation for any particular investment.

I have been trying for some time to write an ELW blog entry about the rapid emergence of new and varied options for investors, large and small, to invest in renewable energy and other sustainable infrastructure development. Unfortunately, every time I update my draft, the marketplace advances and I have to edit it again. To ensure that I actually post something before I retire, I have decided to take a short cut and use this entry to introduce you to several emerging investment models that are becoming available, but I will draw on the work of others, when it is more current than my own.

According to one of the panelists at the recent GTM Solar Market Insight Conference, roughly 25% of U.S rooftops are suitable for standard solar. This leaves the owners of 75% of US roofs unable to host this type of solar energy system. However, the owners of the other 75% could still participate in the solar energy through one or more of the following emerging investment options:

Community Funding and Crowdsourcing. A helpful article on several of the leaders in this area can be found here: Democratizing Solar Power With Community Funding. I am familiar with the account interface and statements for one of the companies in the article, Solar Mosaic, who issues solar notes to persons who invest in its solar projects. The Solar Mosaic system is user friendly and it is about as straightforward and easy to invest in and track an investment made in Solar Mosaic as it is to make an investment in and track the performance of a typical mutual fund. Any prospective investor should be sure to carefully read the prospectus for any project they wish to invest in to adequately understand the risks. Solar Mosaic’s solar notes are available in increments as small as $25. However, they are currently available only to investors in California and accredited investors elsewhere, but Solar Mosaic has indicated it has plans to expand.

Hannon Armstrong (NYSE Ticker Symbol HASI) is able to operate as a Real Estate Investment Trust (REIT) because in financing its sustainable infrastructure projects its owns and operates income producing real estate or real estate-related assets. So long as a REIT complies with applicable Internal Revenue Code requirements, it is able to avoid the double taxation treatment to which publicly traded corporations are subject. HASI shares went public at $12.50 a share in April of this year and as of the date this entry was posted were trading at close to that price and paying a dividend of approximately 4.5%.

Yield Cos. A “Yield Co” is a publicly-traded company that is formed to own operating assets that produce cash flow. The cash is distributed to investors as dividends. The Chabourne & Parke LLP law firm has recently come out with an excellent article profiling several Yield Cos that have already gone public or about to do so, including one that I was preparing to write about. The article, by attorney Keith Martin, who is a nationally respected authority on renewable energy development and finance, starts on page 7.

Renewable Energy MLPs around the Corner? For several years, members of the U.S. Congress have proposed legislation that would put renewables on equal footing with oil and gas investments in one important respect, by giving developers of renewables the opportunity to utilize the Master Limited Partnership (MLP). The MLP is an investment vehicle that offers the tax advantages of a partnership combined with the ease of trading advantages of a publicly traded corporation. More information about the proposed MLP Parity Act is available from the website of Senator Christopher Coons, who has been a champion of such legislation. When the MLP was made available for use by the oil & gas industry, it resulted in a tremendous influx of capital into that industry. The proponents of the MLP Parity Act hope it will have the same effect on the renewables industry.

Finally, a word of caution. Just because an investment is easy to make, doesn’t mean it is prudent. All of the investment options discussed in this post involve risk. Anyone who is interested in exploring them should be just as careful doing their research before invest as they would be (or they ought to be) when investing elsewhere. This includes, among other things, reading the latest financials and the prospectus that was prepared in connection with the investment offering.